Are Escorts Tax Deductible?

August 13, 2017 8:30 am

Escorts provide a valuable service to society. The businessman in particular has a special need for their services, and some would say it is imperative. Life-saving, even. Many have claimed their use of prostitutes and escorts was essential to their job performance and health, touting the stress lowering traits. But are escorts tax deductible? With so many redeeming qualities one would think escorts would be tax deductible. Unfortunately, they are not tax deductible because their services are not legal.

Prostitution has been around since the dawn of humanity and yet we still have legal disputes and social arguments over it daily. Opinions concerning prostitution happen at every level of society. In 2009, Brooklyn, N.Y. tax lawyer William G. Halby, 78, faced a judge after attempting to deduct prostitution expenses he incurred several years before. Halby v. Commissioner, T.C. Memo. 2009-204 (Sept. 14, 2009). He represented himself in court. He was ordered to pay the $21,000 in back taxes he owed plus $4,000 in accuracy-related penalties for his rejected write-off of $120,000.

Are Escorts Tax Deductible? Some Think There’s Good Reason For it

Mr. Halby felt the use of prostitutes was beneficial to his health. He argued in court that his expenses should be allowed because of the many documented benefits of sex therapy. He had no doctor’s prescription, however, and never had he discussed these benefits with his doctors. Halby had kept careful records of all his prostitution visits and related expenses. He kept journals that detailed the sex workers names and services provided, along with the date. Mr. Haldy filed taxes for the 2004 – 2005 year with a Schedule A medical claim attachment that contained only vague descriptions of the services he was deducting. He estimated he had spent $108,000 on prostitutes, $7,000 on supplies and $5,000 in bank and finance charges acquired in connection with loans used to pay for the requested medical expenses. —-> See Court Ruling

Are Escorts Tax Deductible? The Court Says No

The courts decided that he saw the prostitutes for personal enjoyment and the expenses were his own. He was demanded to pay the money he owed to the Internal Revenue Service. The court reminded him that since he was a tax lawyer with considerable experience and should know that he had no basis on which to bring the case forward. The court also ordered Halby to pay a penalty of $4,298 for requesting deductions without any sensible basis in the tax law. Halby graduated from the University of Michigan Law School. He was admitted to the New York Bar in 1956 and began to practice law. To make matters worse, Halby had done this before. The New York State Division of Tax Appeals rejected his bid on similar grounds to deduct $322,000 of sex-related charges from state tax returns covering five tax years–2001 to 2005. A number that is three more than the two years in the federal case. He also lost a bid to keep those records secret.

When he had lost all cases, he told a reporter in a newspaper interview that he was a lonely, divorced man. He lived alone and had no friends or social life. He found the prostitutes he’d find in the back of the Village Voice were helpful to his state of mind and health.

Are Escorts Tax Deductible? No. Do Escorts Get Deductions? Yes!

Prostitutes have to pay taxes like everyone else. It should come as no surprise that there or some parts of their business that they can claim as deductibles on their taxes. Tax evasion is a real threat for people in this trade. Prostitutes and escorts pay taxes using IRS Form 1040 Schedule C and paying self-employment taxes. The first line on the form mis often tricky because it asks what services you provide. Luckily, the Fifth Amendment privilege against self-incrimination licenses a prostitute to leave this line blank or provide an ambiguous answer such as “sale of leisure services.” Prostitutes often want to file taxes, not only to stay out of trouble but also to form a line of credit.

Escorts are not tax deductible, despite their reported benefits in some cases. As long as prostitution is illegal, there will be no provision to deduct their services from your taxes.

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